Small businesses in Ontario can reduce the amount of income tax they have to pay by claiming the Ontario small business deduction. The small business deduction lowers the basic corporate income tax rate in order to reduce the tax burden on SMEs and help them succeed.

Find out about the Ontario small business deduction and how to take advantage of it when filing your corporate tax returns in this article from the experts at T2inc!

How much is the small business deduction in Ontario?

The general income tax rate for corporations in Ontario is currently 11.5%. However, the small business tax rate may be lower, depending on the eligibility of the corporation in question. The small business deduction rate is 8.3%, which can reduce a corporation’s income tax rate to just 3.2% if it qualifies for the deduction.

Who qualifies for the small business deduction in Ontario?

In order to qualify for the Ontario small business deduction, your business must be a Canadian-controlled private corporation (CCPC) throughout the tax year in question. Furthermore, there is a taxable capital business limit. The small business deduction is phased out incrementally for CCPCs with $10 million to $15 million in taxable capital, and is eliminated entirely for those with over $15 million.

How to claim the small business deduction in Ontario

Schedule 500 is a worksheet that is available to corporations to help them calculate their Ontario small business deduction. The schedule is merely meant to facilitate the calculation process and does not need to be filed with your income tax return. Once you have ascertained the deduction amount, enter it on line 402 of Schedule 5 and file the document along with your T2 corporate tax return.

Tools like the Schedule 500 worksheet and specialized taxation software are indispensable if you intend to file your business taxes yourself. If you’re anxious to make the most of the available deductions and would like more guidance and support, you can always get help from a corporate tax specialist.

Optimize your tax deductions with help from T2inc!

Deductions are a great way for small businesses to save money on taxes, but it can be difficult to keep track of what you’re entitled to if you’re not a tax professional. Working with an expert is the best way to ensure that your taxes are optimized and you’re not paying more than necessary.

If you want the freedom and efficiency of tax software but find yourself wishing for a little extra support, T2inc offers the best of both worlds. In addition to our first-rate tax software, our services include online access to expert tax accountants who can provide professional advice and assistance filing your corporate tax returns. Contact us today to optimize your corporate tax deductions!

Frédéric Roy-Gobeil


As President of T2inc.ca and an entrepreneur at heart, I have founded many start-ups such as delve Labs and T2inc.ca. A former tax specialist at Ernst & Young, I am also a member of the Ordre des comptables professionnels agréés CPA and have a master's degree in taxation from the Université de Sherbrooke. With a passion for the world of entrepreneurship and the growth mindset, I have authored numerous articles and videos on the industry and the business world, as well as on accounting, taxation, financial statements and financial independence.

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